Vista Gold Corp (VGZ) 2011 Q3 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Vista Gold's 2011 third quarter results. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded. Today is Monday, November 14, 2011. It is now my pleasure to introduce your host, Mr. Mike Richings. Please go ahead.

Thank you, Sara. Good morning, everyone. Thank you for joining us on our conference call to discuss our results for the three and nine month period ended September 30, 2011. With me on the call today are Fred Earnest, our President and Chief Operating Offer, and Terri Eggert, our interim Chief Financial Officer. I will start with some opening comments and then turn the call over to Terri for a summary of our operating results for the third quarter. Then Fred will give you an update on our project activities and other progress within the corporation, and then we will open it up for questions.

The past year has been a very volatile period for the gold price and gold stocks, particularly junior gold stocks. Vista, like the gold prices, shown to be resilient during this period. Yesterday, when I was preparing for this conference I compared Vista to the major indexes and the market [vectors] junior gold minus ETF. In each case, Vista's outperformed these indices and ETF whether over a 24 month, 12 month or year-to-date. Obviously, some of this value is due to the work we have done on our projects. It is becoming clear to us that [at] Vista more investors and analysts are beginning to appreciate the potential value of our properties in the current gold market.

As we move to complete the feasibility study at Mt. Todd as we commence drilling and a preliminary economic evaluation at Guadalupe de los Reyes and as Midas Gold, which Vista owns 30%, advances its expiration and evaluation program on Yellow Pine and other projects, we expect this appreciation and hence market value to grow. I'm not forgetting Concordia. We're making steady progress there as well. Fred will review all of this in more detail in his presentation later.

When you heard the presentation I think you will agree Vista's prospects for improved value are brighter than ever. I will now ask Terri to review the third quarter financial results and following her review, Fred will give his report. Terri.

Thank you, Mike, and thank you to all of you for participating in our conference call. We really appreciate it. Our balance sheet at September 30, 2011, continued to benefit from our investment in Midas which we recorded at a discounted fair value estimated at $110.2 million, an increase of $27.8 million from its fair value on June 30. This increase was offset by the associated net deferred tax liability of approximately $33.5 million relative to the total unrealized gain of $105.6 million we recognized to date on this investment. Our net deferred tax liability was used computed using a combined effective tax rate of 38.01%.

Our cash and cash equivalent were primarily impacted by the repayment of $23 million in convertible notes in March of this year; the approximate $29 million we raised in April in our public offering of 9 million shares of our common stock; the cash we invested in Midas of $3.6 million; and the cash we used in our operating activities of about $16 million year-to-date.

Turning now to our income statement. We reported net income of approximately $10.7 million or $0.15 per basic and diluted share for the three months ended September 30, 2011. This is compared to a net loss of $4.1 million or $0.09 per basic and diluted share for the same period in 2010. These improved results are primarily attributable to the unrealized gain of approximately $27.8 million that we recognized for the increase in the estimated fair value of our investments in Midas. This increase was partly offset by approximately $10 million in deferred tax expense and increases in exploration, property evaluation and holding costs of $2.5 million and corporate, administration and investor relation expenses of $0.5 million. The increase in exploration property evaluation and holding cost was primarily due to increase of expenses of $3 million associated with feasibility study that we are currently undertaking at our Mt. Todd gold project which was offset partially by a decrease in expenses of $700,000 at our Concordia gold project.

Year-to-date we reported net income of $54.6 million or $0.81 per basic share and $0.80 per diluted share, compared to a net loss of $14.8 million or $0.32 per basic and diluted share for the nine months ended September 30, 2010. Again, these improved results are attributable to the unrealized gain of about $105.6 million we recognized on our investment in Midas. This unrealized gain with our partially offset by $33.5 million in net deferred taxes and increases in exploration property evaluation and holding costs of $3.7 million which were incurred for the feasibility study being undertaken at our Mt. Todd gold project. Fred will now give you an update of project activities.

Good morning, everyone. Since our last conference call, we have announced the results of a new resource estimate at the Mt. Todd gold project; made several key additions to our project development team; hosted a couple of analyst visits to the Mt. Todd project; made substantial progress towards the completion of the Mt. Todd feasibility study and Mt. Todd environmental impact study; completed a drilling program on the Mt. Todd expiration licenses; completed the surface mapping and sampling portion of our exploration program at the Guadalupe de los Reyes gold-silver project; and started the second phase drilling program. Finally, we have made progress towards the submission of new change of forced land use permit application of the Concordia gold project in Mexico. I will go through each of the projects in a little bit more detail.

As reported in our last conference call at our Mt. Todd gold project in Northern Territory, Australia we are advancing the feasibility study, preparing the environmental impact study and undertaking additional exploration. While the feasibility study is progressing well, we did encounter some delays in obtaining permits for the geotechnical drilling. We are presently assessing the completion schedule for the feasibility study and expect to provide guidance to the market with the first part of December regarding an estimated completion date. We received the final impact -- the final environmental impact study guidelines during the quarter and will be required to complete an additional baseline study during the wet season. This study will be completed during the month of January and we will expect to provide an updated permitting scheduled at the same time we provide guidance, with respect to completion of the feasibility study.

On September 6, we announced the results of a new resource estimate for the Mt. Todd gold project. The new resource estimate includes additional 860,000 ounces of gold in the measured and indicated resource category and an additional 370,000 ounces in the inferred resource category. This increase in estimated resource is the result of drilling that was undertaken to obtain core from the metallurgical testing program and to test the limits of known mineralization, in the immediate vicinity of the pre-feasibility study pitch shape. As a result of the location of the drill holes with respect to the preliminary feasibility pitch shape, we expect to see an increase in the estimated proven and probable reserves upon completed of the feasibility study.

A couple of weeks ago, we concluded the drilling program on the exploration license at Mt. Todd. We encountered various intercepts of quartz-sulfate veining similar to the mineralization -- the mineralized material at the Batman deposit, and are currently waiting for assay results. We will announce the comprehensive results for this drilling program once we have received final assays.

One final note on Mt. Todd. As a result of the September resource estimate and progress that has been made on the mine designs for the feasibility study, we have approved and initiated an 8,500 meter drilling program in the Batman deposit that will target the conversion of inferred resources within and immediately below the feasibility study pitch shape to measure indicated resources. I would refer you to slide 12 in our current corporate presentation which can be found on our website at www.vistagold.com for a graphic representation of the blocks that will be targeted in this drilling program.

As indicated, we completed surface mapping and sampling program at the Guadalupe de los Reyes project in Sinaloa, Mexico. October 25, we received the permits for a 30 hole exploration program. It is our intention to complete a 4,000 meter drilling program prior to the end of this year. I am pleased to announce that drilling has begun and that we have completed 325 meters to date. The purpose of the drilling program is, first, to provide core for metallurgical testing from the stock work portion of the deposit. This is a portion of the deposit which is the host for the current resource estimate. The two holes that are planned for providing core for the metallurgical testing program have been completed.

The second part of the drilling program is to test our hypothesis. The underlying low sulphidation epithermal vein system which was mined historically in other parts of the district, is the host for mineralization with high gold -- with the potential for high gold grades and bonanza silver grades. We expect to announce results of this program in the first quarter of 2012.

We have added several people to our project development team in the past months. Mr. Tim Barnett, a metallurgist who has spent the last 10 years of his career in the construction of mining projects has been appointed Vice President of Project Development. Tim will initially be based in Denver and is working to help us complete the feasibility study for the Mt. Todd project. We have also hired an environmental manager and an engineering manager for the Mt. Todd project. Both of these positions are resident in Australia.

At the Concordia project, we are making progress and resolving land title matters which have impeded our ability to present a new change of forced land use permit application. In addition to finalizing the new change of forced land use permit application and a new comprehensive environmental permit application, we have been working on a strategic initiative to advance the Concordia project and hope to announce the progress on this initiative before the end of the year. As indicated, we have had several analysts visits to the Mt. Todd site in the last quarter. We expect two of these analysts will initiate research coverage prior to the end of the year.

One last note of interest. In early September, Vista was incorporated into the market vectors Junior Gold Miners Index and the associated ETF. Since the completion of the Midas IPO in July, the value of their shares has increased 34%. They have made significant progress and there are plans to complete a 30,000 meter drilling program and are finalizing plans to extend the program into the winter. For specific results of the drilling program at the Golden Meadows project, I would refer you to the Midas website at www.midasgoldinc.com and would refer you to their public announcements.

We have many projects coming to a conclusion in the coming weeks and months as Mike indicated previously. We believe that the market is beginning to recognize our efforts with respect to the advancement of Mt. Todd and exploration of the Guadalupe de los Reyes project. We are excited about the value creating potential of these projects and invite you to continue to monitor the information flow as we approach the end of the year and start the new year. I will now turn the time over to Mike. Mike Richings, are you there?

Sorry. I had my phone on mute. Thank you. Just to sum up, I'd just say we are very pleased to report on our progress in the third quarter and remain focused on advancing of all our projects, particularly the completion of the feasibility study at Mt. Todd. With that being said, I'd like to open it up to questions. Operator, can we do that now, please?

(Operator Instructions) Our first question comes from Marco Rodriguez with Stonegate Securities. Please go ahead.

Good morning, guys. Thank you for taking my question. I apologize. I had to jump off the phone for just a minute so if you covered this again -- if you covered this before, I can follow up with you afterwards. Can you give an update on the permit of Mt. Todd?

The permits at Mt. Todd should be addressed in two different topics. One is we have all of the permits for our present activities, i.e., management of the site and also the exploration programs that have been started. We will be updating our mine management plan to incorporate additional drill sites for drilling that will take place in the latter half of the first quarter.

With regard to project permitting, we are continuing to work on the environmental impact study, as I indicated on the call. We have been -- we have received the final EIS guidelines and our preparing the EIS in accordance with those guidelines.

We have been advised that one additional baseline study will be required that will be conducted during the month of January at the start of the wet seaso and we will finalize the EIS and move toward with the presentation and approval process shortly thereafter.

Perhaps, Fred, we should also add that the recent visit to Australia with the Minister of Resources in the Northern Territories, he committed himself to form a committee of key executives in the Northern Territory government to ensure that our process through the permitting requirements is accomplished in a smooth and expeditious manner. It doesn't help -- it doesn't hurt matters at all that there is an election next year in August and I'm sure they are hopeful to -- that they can have a positive announcement in the Northern Territory about the project moving forward.

Great, and then you mentioned attempting to announce progress on Concordia permitting by year end. Can you maybe perhaps provide a little bit more color in regard to that, any kind of confidence level you can share?

The work that we are doing, Marco, is related to having applications finalized. We have also been, as indicated, undertaking some strategic review and a strategic initiative regarding development of the Concordia Project. As we finalize those initiatives and are able to make public announcement, we will do so. Right now, the first priority for us is to resolve the land title issues which have been the key impediment to being able to move forward with the submission of the change of forced land use permit application.

Is there any movement in regard to the land title issues?

We are making progress. There are some meetings being held this week and we are expecting the Secretary of Agrarian Reform will issue a resolution some time in the next two to three weeks that we hope will pave the way to final resolution of this manner.

Got it. Real quick. What are your expectations for cash burn going into your final quarter and then how should we be thinking about that going into 2012?

Our expectations are that right now we have approximately $26 million in cash. We expect to finish the year at approximately $22 million and will then be moving forward into the new year. Right now we have approved budget for the first quarter and will be reviewing with our Board of Directors strategic plans for the balance of the year once we had finished the Mt. Todd feasibility study and have drilling results for this program that's underway at Guadalupe de los Reyes.

Got it. Thank you, Guys.

Thank you. Our next question comes from [Greg Pulsar] with [Aspen Alpha]. Please go ahead.

Thanks, guys. I think my main question was just answered when you were talking about the spending on the $27 million in the CapEx. Any further guidance on CapEx over the next 24 months, or do you think you covered it?

I would just say, Greg, as we move forward with the completion of the feasibility study at Mt. Todd and obtain permitting that, obviously, we will be in a position where we will be evaluating how we go forward with the development of Mt. Todd. That obviously has a very significant capital cost associated with it. There are several different options available to us. We have not selected what is the preferred financing or developing option at this point in time.

Another point would be to keep in mind that as we complete this drilling progam at Guadalupe de los Reyes we have announced our intentions to complete a preliminary economic assessment at the end of the first half of next year. We intend to move from there to the completion of a preliminary feasibility study that falls within the window of your 24 months. We may be in a position where we are evaluating (audio cut out).

Keep in mind that we have warrants that are outstanding, a little over 15 million warrants that presently the exercise price is $4 per share, and those can be forced at a price -- at a 35% premium to that exercise price, and we are working to get our share price to the point that we can realize the exercise of those warrants.

What are the expiration dates on those warrants?

We just passed the first anniversary. There are just a little under four years remaining on those warrants. Each year the price increases. Next year it will go up to $4.50, the third year it goes to $5 and it will remain there through the life -- through the last year of the warrants.

Got it. One more thing. Any estimate on the strategy, which project will come to production first? It looks like Concordia, Mt. Todd, Guadalupe.

Right now, Mt. Todd is our flagship project, our core project and we are working to advance that. Obviously, Concordia has the benefit of a much shorter construction period if permits can be obtained in a timely manner, right now we don't see that permits could be obtained prior to the middle of next year. Guadalupe de los Reyes is a project that as we are just starting the preliminary economic assessment phase, should results prove to be very encouraging, we could see ourselves fast tracking that project.

Great that's it thanks, guys.

Thank you ladies and gentlemen. (Operator Instructions) There are no more questions at this time. Please continue.

Well, Operator, if there are no more questions, we might as well call the conference call to a close. Fred or Terri, do you have further comments before we close the conference?

No, I don't.

I would just thank everybody for your interest and for taking the time to be on the call with us this morning. As always, if you have other questions, feel free to contact management. We would be happy to spend time with you.

Perfect. Ladies and gentlemen, this concludes our conference call for today we thank you for your participation. You may disconnect your line and have a great day.

Thank you everyone.

Thank you.

Thank you.